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Payment of Bonus (Amendment) Bill, 2015

The Payment of Bonus (Amendment) Bill, 2015 was introduced in
Lok Sabha by the Minister of State for Labour and Employment, Mr. Bandaru
Dattatreya, on December 7, 2015. The
Bill seeks to amend the Payment of Bonus Act, 1965. The Bill was passed by Lok
Sabha on December 22, 2015 and was subsequently passed by the Rajya Sabha on
the very next day, i.e., December 23, 2015

The Payment of Bonus Act, 1965 (the Act) was enacted with a
view to provide for the payment of bonus to persons employed in certain
establishments on the basis of profits or on the basis of production or
productivity and for matters connected therewith. Thereafter, the Act was amended
several times and last amended in the year 2007.

The Payment of Bonus Act, 1965 provides for the annual
payment of bonus to employees of certain establishments (including factories
and establishments employing 20 or more persons). Under the Act, bonus is calculated on the
basis of the employee’s salary and the profits of the establishment.

Highlights of the 2015
Bill

Employees eligible for bonus: The Act mandates payment of
bonus to employees’ whose salary or wage is up to Rs 10,000 per month. The Bill seeks to increase this eligibility
limit to Rs 21,000 per month.

Calculation of bonus: The Act provides that the bonus payable
to an employee will be in proportion to his or her salary or wage. However, if an employee’s salary is more than
Rs 3,500 per month, for the purposes of calculation of bonus, the salary will
be assumed to be Rs 3,500 per month. The
Bill seeks to raise this calculation ceiling to Rs 7,000 per month or the
minimum wage notified for the employment under the Minimum Wages Act, 1948 (whichever
is higher).

Prior publication of rules: The Act provides that the central
government may make rules to implement its provisions. The Bill seeks to mandate prior publication
of such rules in the Official Gazette to allow for more public consultation.

Retrospective effect: The Bill will have retrospective effect
and will come into force from April 1, 2015.